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There’s an accelerator for that!

Back in 2012, the conservative count of U.S.-based accelerators was approximately 150 (according to data from CrunchBase), and that number has only increased exponentially, both in the United States and worldwide. Furthermore, universities, corporations, and governments are getting involved by investing in accelerators or creating their own. While these accelerators may be structured similarly or even modeled after the same handful of prominent accelerator programs such as Y Combinator and Techstars, their motivations and goals also differ based on the sponsoring entity.

In universities, accelerators such as SkyDeck and Summer Launchpad tend to be grant-based (i.e., equity-free), emphasize the learning aspect of entrepreneurship, and aim to help launch student ventures. Corporate-sponsored accelerators often take the form of partnerships, such as the Disney Accelerator, powered by Techstars. In this setting the accelerator provides an environment to outsource innovation and riskier R&D projects. Many times, a specific technology platform, such as Microsoft Azure, is used and that may position accelerator participants as prime acquisition targets. In terms of government-funded accelerators, regional impact and economic growth become higher priority. For example, the U.S. Small Business Administration launched the Growth Accelerator Fund, which awards $50,000 to fund accelerators that contribute to job growth. Another example is the K-Startup Grand Challenge, which is organized and funded by the South Korean government. It is clear that many options are available to entrepreneurs, but the key point here is for entrepreneurs to carefully consider whether their incentives are aligned with the goals of the accelerator before making a decision to participate.

Not only has the number of accelerators increased, we are also starting to see more vertical-, industry-, and group-specific accelerators. The diversity of verticals is noteworthy, ranging from hardware, digital health, to education, financial services, and even food tech. Furthermore, there are accelerators structured for underrepresented groups, such as MergeLane for women and Manos Accelerator for Latino founders. This is yet another factor entrepreneurs need to consider when choosing accelerators – will a more balanced, industry-agnostic cohort provide more well-rounded perspectives, or will a focused, vertical- or group-specific cohort enable more targeted discussion and learnings? From an academic perspective, this is still an intriguing open question. However, we have made progress on more fundamental questions related to accelerators to further understand this source of entrepreneurial finance.

Growing interest in accelerator research

In recent years, the popularity of accelerators has also spawned an increase in academic research on this topic. In fact, there have been several Kauffman Dissertation Fellows focused primarily on accelerators in the past few years. In terms of research in social sciences more broadly, we are also starting to see sessions and papers discussing accelerators at the Academy of Management Annual Meetings. In addition to growing interest from practitioners and academics alike, another reason we see this surge in research is that ten years after the first accelerator was founded, we now have sufficient amount of data to analyze past performance of companies. Furthermore, data sources such as CrunchBase have become more comprehensive and reliable over time.

The main findings so far are that accelerators can help companies fail (Winston-Smith and Hannigan, 2015; Yu, 2015), and top-tier accelerators shorten the time-to-venture capital financing (Hallen, Bingham, and Cohen, 2014). Accelerator companies are more likely to “fail faster” compared to similar non-accelerator companies due to the intense mentorship and feedback founders receive in accelerators. This can been seen as a benefit of accelerators because founders realize sooner rather than later that they should not invest further time and money into an idea. This allows both founders and investors to reallocate resources more efficiently. In specific programs, there is also evidence that mentorship in particular positively contributes to fundraising (Gonzales-Uribe and Leatherbee, 2015). Looking ahead, there are questions regarding entrepreneurial policy that require data beyond archival data to assess causal impact. One solution is to run field experiments which would allow us to establish causal relationships between a randomized control group and a treatment group. This is often difficult and costly in an entrepreneurship context, but efforts by Fehder, Floyd, and Hochberg are underway to run a large-scale field experiment to evaluate how accelerators can help entrepreneurs to develop business acumen.

We are just starting to answer fundamental questions about accelerators and their role in the entrepreneurial ecosystem, and there are still open questions, such as: Which accelerator characteristics matter the most? How do accelerators impact innovation? Can accelerators increase entrepreneurship or affect regional economic growth? In ongoing work, we are also investigating how founders apply their experience in accelerators to subsequent ventures. These questions, and many more present opportunities for future research.